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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
SECURITIES AND EXCHANGE COMMISSION v. COMPARATOR SYSTEMS
CORPORATION, ROBERT REED ROGERS, SCOTT HITT AND GREGORY ARMIJO,
Civil Action No. 96-3856 (LGB) (JGx) (C.D. Cal.)
Litigation Release No. 15056 / September 19, 1996
Accounting and Auditing Enforcement
Release No. 819 / September 19, 1996
The U.S. Securities and Exchange Commission announced today
that on September 16, 1996, the Honorable Lourdes G. Baird,
United States District Judge, entered a Final Judgment against
defendant Comparator Systems Corporation and also entered
judgments against defendants Robert Reed Rogers and Gregory
Armijo. The Final Judgment against Comparator permanently
restrains and enjoins Comparator from violating the anti-fraud,
reporting, and books and records provisions of the securities
laws, specifically Section 17(a) of the Securities Act of 1933
and Sections 10(b), 13(a), and 13(b)(2)(A)-(B) of the Securities
Exchange Act of 1934 ("Exchange Act") and Rules 10b-5, 13a-1,
13a-13, and 12b-20 thereunder. The judgments against defendants
Rogers and Armijo permanently restrain and enjoin Rogers and
Armijo from violating those same provisions, as well as Section
13(b)(5) of the Exchange Act and Rule 13b2-1; permanently bar
Rogers and Armijo from serving in the future as an officer or
director of any public corporation; and continue the freezes on
Rogers's and Armijo's assets (subject to allowances for
reasonable living expenses) pending the determination, following
further discovery, of the appropriate amount of disgorgement and
penalties to be paid by those defendants. The judgments permit
Comparator's new management to employ Rogers and Armijo as
consultants for a limited period, with restrictions on their
compensation, and forbid Comparator from transferring any item of
value to defendant Scott Hitt, against whom the litigation
continues. Comparator, Rogers, and Armijo consented to the entry
of the foregoing judgments without admitting or denying the
allegations of the Commission's Complaint.
The Complaint, filed on May 31, 1996, alleged that
Comparator issued false and misleading financial statements for
the fiscal years ending June 30, 1994 and June 30, 1995 and for
the first three quarters of fiscal year 1996, which grossly
inflated the company's assets throughout that period. The
Complaint further alleges that defendants Rogers, Armijo, and
Hitt caused Comparator to file these false financial statements
for the purpose of enabling Comparator common stock to remain
listed for trading on the National Association of Securities
Dealers' Automated Quotation ("NASDAQ") SmallCap Market System
and to facilitate the sale of Comparator common stock to the
public.
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In a related matter, the Commission has instituted
administrative proceedings against Eli Buchalter, Comparator's
former auditor, and the Eli Buchalter Accountancy Corporation
("the Buchalter Corp."). Simultaneously, the Commission accepted
Buchalter and the Buchalter Corp.'s offers of settlement in which
they consented, without admitting or denying the findings
contained therein, to the entry of orders that they cease and
desist from further violations of Sections 10(b) and 13(a) of the
Exchange Act and Rules 10b-5, 13a-1, and 12b-20 thereunder, and
that deny them the privilege of appearing or practicing before
the Commission as an accountant. The Commission's Order
Instituting Proceedings finds that Buchalter and the Buchalter
Corp. were a cause of Comparator's violations of the foregoing
provisions of the securities laws and engaged in improper
professional conduct in connection with their audits of
Comparator's financial statements. See Securities Exchange Act
of 1934 Release No. 37702 and Accounting and Auditing Enforcement
Release No. 818, dated September 19, 1996.
The Commission's investigation is continuing as to other
issues concerning Comparator and trading in its securities. See
also Litigation Release No. 14927 and Accounting and Auditing
Enforcement Release No. 786, dated May 31, 1996; Litigation
Release No. 14979 and Accounting and Auditing Enforcement Release
No. 801, dated July 11, 1996.